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FUTURE OPTIONS FOR THE UK-ASEAN ECONOMIC RELATIONSHIP
Dr. Jürgen Haacke and John Harley Breen
Briefing paper for the workshop co-organised by the UK-ASEAN Business Council
(UKABC) and the LSE Saw Swee Hock Southeast Asia Centre (LSE SEAC) on
Wednesday 27th June 2018.
Research and text by the LSE SEAC with input from UKABC.
Copyright © 2018. All rights reserved.
Future Options for the UK-ASEAN Economic Relationship
1
Table of Contents
Executive Summary........................................................................................................................ 2
Introduction..................................................................................................................................... 4
1. UK Economic Performance with Southeast Asia .................................................................... 5
1.1. Trade in Goods and Services .............................................................................................. 5
1.2. UK Foreign Direct Investment (FDI) into ASEAN ............................................................... 6
2. The EU Context to UK Relations with Southeast Asia ............................................................ 8
2.1 Relationship History ............................................................................................................. 8
2.2 Economic Interdependence: ASEAN and EU .................................................................... 10
2.3 Moves Towards Free Trade Agreements with Southeast Asia ....................................... 10
3. Future UK-ASEAN Relations: what are the options? ............................................................ 12
3.1 UK-ASEAN Formal Partnership Agreements .................................................................... 12
3.1.1 Questions and points to consider .......................................................................... 14
3.2. Possible Bi/Multi-lateral Trade Relations with ASEAN States ....................................... 15
Conclusion .................................................................................................................................... 19
Annex ............................................................................................................................................. 20
Future Options for the UK-ASEAN Economic Relationship
2
Executive Summary
The purpose of this report is to inform the UK’s private sector of the possible options Her
Majesty’s Government (HMG) may wish to pursue in its future economic relationship with the
Association of Southeast Asian Nations (ASEAN) post-Brexit. It provides an overview of the
current political and economic relations between the United Kingdom (UK) and Southeast
Asia, as well as the European Union (EU) and ASEAN. Four potential options for a formal UK-
ASEAN partnership agreement are presented, in addition to three options for UK trade
liberalisation with Southeast Asia.
While HMG maintains bilateral diplomatic relations with all Southeast Asian countries, its
current relationship with ASEAN is mediated through the EU. Despite being ASEAN’s second
largest trading partner and accounting for almost a quarter of total FDI to the ASEAN region,
the EU does not currently have a free trade agreement (FTA) with ASEAN. Negotiations for a
region-to-region FTA were launched in 2007 but were paused in 2009 due to the heterogeneity
of ASEAN member states. In 2017, the EU and ASEAN agreed to take new steps to resume
these talks. In terms of bilateral FTAs (seen partly as a stepping stone for a regional-level
FTA), the EU has concluded negotiations with Singapore and Vietnam (neither of these FTAs
have entered into force) in addition to conducting negotiations with Malaysia, Thailand,
Philippines and Indonesia.
Post-Brexit, the UK could seek to build a formal partnership with ASEAN and/or pursue trade
liberalisation with Southeast Asia through bilateral and multilateral trade arrangements.
However, before the UK can commence future trade negotiations, it has to conclude Brexit
negotiations. The UK will also need to disentangle its World Trade Organisation (WTO)
membership from the EU. This involves negotiating the terms of its commitments in relation
to trade in services and merchandise. This could take some time as the WTO operates by
consensus.
In terms of formal partnerships with ASEAN, the UK’s options consist of the three partnership
categories set out in the ASEAN Charter (Dialogue, Sectoral, and Development) with a ‘bespoke’
fourth option being considered among policy circles.
In principle, there are also at least three potential opportunities available for future trade
relations between the UK and ASEAN:
1. Bilateral FTAs with individual ASEAN member states. At this level, the UK is actively
considering a trade agreement with Singapore given the strong trading relationship
and shared history between the two nations. UK officials hope to be able to roll-over
the EU-Singapore FTA (EUSFTA), but this requires the latter to enter into force before
March 2019;
Future Options for the UK-ASEAN Economic Relationship
3
2. An ASEAN-UK FTA which the UK could explore in principle but is dependent upon
dialogue partner status;
3. FTAs beyond ASEAN such as the Comprehensive and Progressive Agreement for
Trans-Pacific Partnership (CPTPP) that involve only some Southeast Asian states
(which HMG has already signalled an interest in joining).
When considering the options available to the UK, it is worth noting that a formal partnership
with ASEAN does not guarantee that the business prospects of UK companies operating in
Southeast Asia will dramatically improve. However, building a formal relationship may be a
pre-requisite for strong and effective UK-ASEAN relations in the future and could affect the
extent to which HMG is able to promote the interests of UK business in the region. Considering
ASEAN’s general approach to its external relations, the initiative for a formal relationship
between ASEAN and the UK will almost certainly need to come from HMG.
Future Options for the UK-ASEAN Economic Relationship
4
Introduction
The United Kingdom (UK) has longstanding and deep historical relations with Southeast Asia.
At present, the UK’s interests relate to a range of domestic developments and capacity
challenges in the region, as well as wider geopolitical concerns in the Asia-Pacific. There may
also be opportunities for the UK’s own private sector to benefit from the region’s strong
economic growth. Currently, the UK engages with Southeast Asia both bilaterally with
individual states in the region, and multilaterally with the Association of Southeast Asian
Nations (ASEAN). The UK’s formal engagement with ASEAN-10 is currently mediated by the
European Union (EU), but with Brexit around the corner the question is: What is the future for
UK’s economic relationship with Southeast Asia?
The UK’s private sector is a key stakeholder in policy towards Southeast Asia, and therefore
should have an important voice in the evolving policy debate. This report is designed to
provide background information that will help facilitate a discussion with the UK’s private
sector to ascertain its preferences about future UK-ASEAN economic relations. The
discussion will be co-organised by the LSE Saw Swee Hock Southeast Asia Centre (LSE SEAC)
and the UK-ASEAN Business Council (UKABC) on Wednesday, 20 June 2018. Once this
discussion has taken place, the report will be revised to inform wider policy debate.
This report has four main objectives:
1. To outline the UK’s economic ties with the Southeast Asia region;
2. To clarify the existing EU context to UK-ASEAN-10 relations;
3. To identify possibilities for future formal UK-ASEAN relations;
4. To outline options for the UK’s future economic relationship with Southeast Asia.
Readers of the report are encouraged to consider the text with the following questions in mind:
1. Should HMG focus on building, developing and strengthening its relationship with
ASEAN irrespective of any plans for future trade agreements involving Southeast Asian
countries that might also be pursued?
a. What kind of relationship with ASEAN will best support the UK’s private sector
in Southeast Asia?
b. Should the UK have an Ambassador solely dedicated to ASEAN?
c. Should the UK have a dedicated Trade Commissioner to ASEAN?
2. Should HMG prioritise joining multilateral trade deals such as the ASEAN-UK FTA
and/or CPTTP over bilateral free trade agreements with relevant Southeast Asian
partners?
Future Options for the UK-ASEAN Economic Relationship
5
1. UK Economic Performance with Southeast Asia
Ascertaining an accurate picture of trade and investment relations between the UK and
Southeast Asia is challenging given discrepancies of relevant economic data depending on
sources used. Nevertheless, statistics do paint a picture of sustained trade and investment
activity in recent years. Please see the annex for tables, charts and graphs referred to in the
information below.
1.1 Trade in Goods and Services
The UK’s economic relations with Southeast Asia are significant even if there are much bigger
exports markets elsewhere. In 2016, two-way trade between the UK and Southeast Asia
amounted to £32.4 billion - a 9.1% increase from 2015. Among the ASEAN member states,
Singapore was the UK’s largest trading partner, accounting for 36.1% of the UK’s total trade
with the region, followed by Thailand (17.1%) and Vietnam (14.9%).1
The UK currently has a trade deficit with Southeast Asia. In 2016, UK exports in goods and
services to Southeast Asia stood at £13.6 billion, while UK imports from the region reached
£18.8 billion. The 2016 trade deficit of £5.1 billion compares to a trade deficit of £3.2 billion
in 2015. Of all UK exports to Southeast Asia, £8.9 billion (64.9%) were in goods, while £4.8
billion (35.1%) were in services. There was a trade in goods deficit of £5.2 billion and a trade
in services surplus of £117 million.2
When disaggregating Southeast Asia, it quickly becomes clear that some trading relationships
with states in the region are not very substantial (Laos, Cambodia, Myanmar, Brunei
Darussalam, and even the Philippines). Given their respective market size, UK exports to some
countries would appear to be relatively limited (Indonesia and perhaps Vietnam), while UK
exports to other significant markets in the region have been on a downward trajectory
(Malaysia and Thailand) since 2013.3
UK exports to ASEAN are higher than exports to Japan, India and South Korea.4 Exports in
goods to Singapore are greater than exports to all other ASEAN countries combined. The UK
also imports more from Singapore than all other ASEAN countries except Vietnam (table 1
and table 2). One reason for this is that Singapore continues to serve as the major entrepôt
for the UK in Southeast Asia. EU statistics show that in 2015 the UK was the third largest
exporter to the ASEAN among the EU-28. The main recipients of EU-28 exports are Singapore,
1 Department for International Trade, Trade and Investment between the United Kingdom and Southeast Asia (data reported by the UK), London: Department for International Trade, last updated 7 February 2018, p. 1. 2 Department for International Trade, Trade and Investment between the United Kingdom and Southeast Asia (data reported by the UK), London: Department for International Trade, last updated 7 February 2018, p. 1. 3 ‘Who does the UK trade with?’, Office for National Statistics, last updated 3 January 2018, https://www.ons.gov.uk/businessindustryandtrade/internationaltrade/articles/whodoestheuktradewith/2017-02-21 4 High Commission of the Republic of Singapore, UK-ASEAN Relations, High Commission of the Republic of Singapore and UK-ASEAN Business Council, p. 1.
Future Options for the UK-ASEAN Economic Relationship
6
Thailand, Malaysia, Indonesia and Vietnam (chart 1 and chart 2).5 The same five ASEAN
members were the largest exporters of goods from ASEAN to the EU-28, with the UK, Germany,
and the Netherlands the main recipients (chart 3 and chart 4).6 In 2016, UK market share in
ASEAN-4 (Singapore, Malaysia, Thailand and Vietnam) dipped to 1%, on par with Italy and
losing ground to Germany and France (table 3). All four EU countries picked up market share
in Singapore, offsetting losses in Malaysia (with the exception of Germany). The UK was the
only country to maintain market share in Vietnam, but lost ground in Thailand where Germany
and France increased their presence.7
The UK is one of the largest exporters of services from the EU to ASEAN, with more than half
of the UK’s exports and imports in services to and from Southeast Asia relating to Singapore
(table 1, table 2, chart 5, and chart 6).8 Singapore in turn dominated the supply of services to
the EU-28 with the main recipients of these services being Germany, the UK, France and the
Netherlands (chart 7 and chart 8).9
One of the more substantial service exports to the region is education, which contributes
significantly to the UK’s set of soft power assets in Southeast Asia. Malaysia, Singapore and
Thailand ranked in the top ten non-EU sending countries in 2016/17, with Malaysian students
averaging around 17,000 per annum over the last five years.10 Transnational students from
Southeast Asia studying wholly overseas for a UK higher education qualification in 2016/17
numbered over 130,000.11 Indonesia, Malaysia, the Philippines,Thailand and Vietnam are also
partner countries of the Newton Fund which was launched in 2014.The fund aims to build
research and innovation partnerships, managed through the UK’s Department of Business,
Energy and Industrial Strategy, with a total UK government investment of £735 million up until
2021, with matched resources from partner countries.12
5 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, Brussels: European Union, 2017, http://ec.europa.eu/eurostat/documents/3217494/8092219/KS-01-17-424-EN-N.pdf/8e0e728b-1d36-4aae-b742-851a73963e51, p. 28. 6 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, Brussels: European Union, 2017, http://ec.europa.eu/eurostat/documents/3217494/8092219/KS-01-17-424-EN-N.pdf/8e0e728b-1d36-4aae-b742-851a73963e51, p. 29. 7 Southeast Asia Economic and Trade Policy Network, SE Asia Market Share Analysis, Singapore: Southeast Asia Economic and Trade Policy Network, p. 5. 8 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, Brussels: European Union, 2017, http://ec.europa.eu/eurostat/documents/3217494/8092219/KS-01-17-424-EN-N.pdf/8e0e728b-1d36-4aae-b742-851a73963e51 p. 32. 9 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, Brussels: European Union, 2017, http://ec.europa.eu/eurostat/documents/3217494/8092219/KS-01-17-424-EN-N.pdf/8e0e728b-1d36-4aae-b742-851a73963e51 p. 33. 10 ‘International student statistics: UK higher education,’ UK Council for International Student Affairs, last updated 2 April 2018, https://www.ukcisa.org.uk/Research--Policy/Statistics/International-student-statistics-UK-higher-education; ‘Opportunities for UK Businesses in the Education Sector in ASEAN,’ UK-ASEAN Business Council, last updated unknown, http://www.ukabc.org.uk/microsite/educationisgreat/ 11 ‘Chart 5 - Transnational students studying wholly overseas for a UK higher education qualification 2016/17,’ Higher Education Statistics Agency, last updated February 2018, https://www.hesa.ac.uk/data-and-analysis/students/chart-5 12 ‘Newton Fund partner countries,’ The British Council, last updated unknown, https://www.britishcouncil.org/education/science/newton/partner-countries
Future Options for the UK-ASEAN Economic Relationship
7
1.2. UK Foreign Direct Investment (FDI) into ASEAN
The UK was the fifth largest EU investor in ASEAN in 2016, holding an investment stock of
£22.4 billion, a decline of 20.7% compared to 2015.13 According to FDI figures from the Office
of National Statistics (ONS) (table 4) the UK’s existing investment stock is highest in
Singapore and Indonesia, followed by Malaysia and Thailand. UK FDI into mainland Southeast
Asia appears to be negligible except for Thailand and to some extent Vietnam. The picture
looks different for maritime Southeast Asia, on which the UK and other EU-member states
(see below for comparative analysis) concentrate the most. Notably, there was significant UK
disinvestment from Malaysia after 2013. Statistics from the ASEAN Secretariat show that the
UK’s total investment into ASEAN-10 amounted to US$1,729.31 million in 2016, following
much higher inward flows in the preceding three years (table 5).14 The main investment areas
comprise financial and insurance, manufacturing, wholesale and retail trade, and other
services (table 5).
When compared to other EU members, UK investments into the ASEAN region in 2016
exceeded those from Germany and France but were significantly lower when compared to the
Netherlands, Ireland, Luxembourg and Denmark (table 6). Furthermore, statistics from the EU
seem to support ASEAN’s statistics (Graph 1). While there is some discrepancy on total
figures, both ASEAN and EU statistics show that the Netherlands, the UK and Luxembourg
were the main sources of net outflows of FDI from the EU to ASEAN in 2013-2015 (graph 1).
These outflows from the Netherlands, UK and Luxembourg accounted for 79.0% of all EU-28
FDI to ASEAN during this period.15 The vast majority of this investment was destined for
Singapore (84.4 %), with a smaller share to Malaysia (9.4 %) and the remainder split between
the other ASEAN members (graph 2).16
13 Analysis only for Thailand, Malaysia, Indonesia and Singapore. Department for International Trade, Trade and Investment between the United Kingdom and Southeast Asia (data reported by the UK), London: Department for International Trade, last updated 7 February 2018, p. 2; High Commission of the Republic of Singapore, UK-ASEAN Relations, London: High Commission of the Republic of Singapore, p. 1. 14 Note: ASEAN 2016 data is preliminary. 15 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, Brussels: European Union, 2017, http://ec.europa.eu/eurostat/documents/3217494/8092219/KS-01-17-424-EN-N.pdf/8e0e728b-1d36-4aae-b742-851a73963e51 p. 35. 16 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, Brussels: European Union, 2017, http://ec.europa.eu/eurostat/documents/3217494/8092219/KS-01-17-424-EN-N.pdf/8e0e728b-1d36-4aae-b742-851a73963e51 p. 35.
Future Options for the UK-ASEAN Economic Relationship
8
2. The EU Context to UK Relations with Southeast Asia
HMG maintains diplomatic relations with all Southeast Asian countries on a bilateral basis.
However, its current relationship with ASEAN (a strictly intergovernmental organisation, with
a relatively weak Secretariat, that leaves the implementation of collective decisions made by
consensus to individual members) is mediated through the EU. EU-ASEAN interregional
relations have developed over more than 40 years.
2.1. Relationship History
The EU became ASEAN’s Dialogue Partner in 1977, formally institutionalised through the
ASEAN-European Economic Community (EEC) Cooperation Agreement on 7 March 1980.17
Over time, EU-ASEAN dialogue and cooperation extended beyond development, economics,
trade, and social-cultural issues, to include political and security matters. The EU is one of the
original participants in the ASEAN Regional Forum (ARF), which first met in 1994 and aims to
‘foster constructive dialogue and consultation on political and security issues of common
interest and concern’ in the Asia-Pacific region.18
In 2007, the two sides adopted the Nuremberg Declaration on an EU-ASEAN Enhanced
Partnership.19 The EU and ASEAN reaffirmed their commitment to this partnership in 2010.
Following the EU’s accession to ASEAN’s Treaty of Amity and Cooperation (TAC) in 2012, the
two sides adopted the Bandar Seri Begawan Plan of Action to Strengthen the ASEAN-EU
Enhanced Partnership (2013-2017), which maps out concrete areas for cooperation. As with
the Nuremberg Declaration, the key objective of the 2013-2017 Plan of Action was to support
ASEAN’s goal of regional integration and community building.20
In 2015, the High Representative for Foreign Affairs and Security Policy, the European
Commission, and the Foreign Affairs Council agreed to develop a strategic partnership with
ASEAN, with the aim of joining the East Asia Summit (which is the only ‘leaders-led’ strategic
dialogue organised multilaterally in the East Asia region).
More recently, the ‘ASEAN-EU Plan of Action’ (2018-2022) sets out the latest ideas for
cooperation in support of ASEAN ‘community building’.21 From the EU’s perspective,
17 ASEAN, Overview: ASEAN-EU Dialogue Relations, Jakarta: ASEAN Secretariat, 2017, http://asean.org/storage/2012/05/Overview-of-ASEAN-EU-Relations-as-of-Sept-2017_FINAL-1.pdf 18 ‘About The ASEAN Regional Forum’, ASEAN Secretariat, last updated unknown, http://aseanregionalforum.asean.org/about.html 19 ‘Nuremberg Declaration on an EU-ASEAN Enhanced Partnership’, European Union External Action Service, 2007, https://eeas.europa.eu/sites/eeas/files/2007_16_nuremberg_declar.pdf 20 ‘The EU accedes to Treaty of Amity and Cooperation in Southeast Asia’, European Commission, last modified 12 July 2012, http://europa.eu/rapid/press-release_IP-12-781_en.htm; European Union External Action Service (EEAS), Bandar Seri Begawan Plan of Action to strengthen the ASEAN-EU Enhanced Partnership (2013-2017), Brussels: European Union External Action Service, 2012, https://eeas.europa.eu/sites/eeas/files/pub_2013_bsbactionplan_en.pdf 21 ASEAN, ASEAN-EU Plan of Action (2018-2022), Jakarta: ASEAN Secretariat, 2018, http://asean.org/storage/2017/08/ASEAN-EU-POA-2018-2022-Final.pdf; ASEAN, Overview of EU-ASEAN Dialogue
Future Options for the UK-ASEAN Economic Relationship
9
deepening and expanding its relationship with ASEAN has increasingly served as part of a
strategy to assert itself as a legitimate player in wider Asian regionalism.22
Southeast Asian governments and the ASEAN Secretariat value the role that the EU can play
in supporting the ongoing process of ASEAN community building. The EU supports the
implementation of ASEAN Blueprints relating to the ASEAN Political-Security Community
(APSC), the ASEAN Economic Community (AEC), and the ASEAN Socio-Cultural Community
(ASCC). In relation to the APSC, the EU has sought to move forward security cooperation under
the auspices of the ARF to focus on preventive diplomacy and mediation. It has also engaged
in a dialogue on maritime security.23 At present, however, the EU is not a member of the ASEAN
Defence Ministers Meeting Plus (ADMM+).24
The EU has been a generous partner to ASEAN. In the current budget cycle, the EU has
allocated €170 million (2014-2020) to support ASEAN integration and the Secretariat - more
than double the amount under the previous cycle (€70 million).25 Within that budget, €85
million supports the ASEAN Economic Community Blueprint 2025, approximately €60 million
is reserved for initiatives and projects tackling climate change and other environmental
concerns, and a further €20 million is for an Enhanced Regional EU-ASEAN Dialogue
Instrument (E-READI). This is in addition to the €3 billion the EU has also pledged to reduce
poverty and address development gaps in low-income ASEAN member states.26
In April 2018, the EU and ASEAN launched two flagship development programmes: the E-
READI, mentioned above, and the ASEAN Enhanced Regional Integration Support from the EU
(ARISE Plus). Via E-READI, ASEAN is meant to learn from the EU integration process. ARISE-
Plus is designed to support ASEAN’s economic integration, covering areas such as the single
market, trade facilitation, reducing non-tariff barriers to trade, ASEAN statistics, Intellectual
Property Rights, and civil aviation.27
Relations, Jakarta: ASEAN Secretariat, 2017, http://asean.org/storage/2012/05/Overview-of-ASEAN-EU-Relations-as-of-Sept-2017_FINAL-1.pdf 22 European Commission, Joint Communication to the European Parliament and the Council: The EU and ASEAN: a partnership with a strategic purpose, Brussels: European Commission, 2015, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52015JC0022&from=EN, p. 2. 23 ‘The 4th EU-ASEAN High Level Dialogue on Maritime Security Cooperation’, Mission of the European Union to ASEAN, last updated 6 October 2017, https://eeas.europa.eu/delegations/association-southeast-asian-nations-asean/33407/4th-eu-asean-high-level-dialogue-maritime-security-cooperation_en 24 ‘EU-ASEAN relations, factsheet’, European Union External Action Service, last updated 3 August 2017, https://eeas.europa.eu/headquarters/headquarters-homepage/30722/eu-asean-relations-factsheet_en 25 Xavier Nuttin, ‘The Future of EU-ASEAN Relations,’ Directorate-General for External Policies, Brussels: European Parliament, 2017, http://www.europarl.europa.eu/RegData/etudes/STUD/2017/578043/EXPO_STU(2017)578043_EN.pdf, p. 22. 26 ‘EU Projects with ASEAN’, European Union External Action Service, last modified 11 May 2016, https://eeas.europa.eu/headquarters/headquarters-homepage_en/907/EU%20Projects%20with%20ASEAN 27 ‘ASEAN, EU launch flagship programmes on policy dialogue and economic integration’, Mission of the European Union to ASEAN, 17 April 2018, https://eeas.europa.eu/delegations/association-southeast-asian-nations-asean/43055/asean-eu-launch-flagship-programmes-policy-dialogue-and-economic-integration_en
Future Options for the UK-ASEAN Economic Relationship
10
2.2. Economic Interdependence: ASEAN and EU
The EU member states collectively constitute ASEAN's second largest trading partner after
China, with ASEAN-EU two-way trade consistently increasing from 2013, standing at €227
billion in 2017.28 The trade balance favours ASEAN member states with ASEAN exports to the
EU valued at almost €135 billion in 2017, compared to EU exports to ASEAN which were €91
billion in the same period.29 The EU's main exports to ASEAN are chemical products,
machinery and transport equipment, while imports from ASEAN are machinery and transport
equipment, agricultural products as well as textiles and clothing.30
The EU prides itself for investing more in the ASEAN region than the US or China. Its
investment stock equates to almost a quarter of total FDI committed to the ASEAN region.31
Between 2004 and 2016 EU companies have been investing approximately €12 billion per year
on average into the ASEAN region.32
2.3. Moves toward Free Trade Agreements with Southeast Asia
There is currently no free trade agreement (FTA) between the EU and the member states of
ASEAN. Negotiations for a region-to-region FTA between the EU and ASEAN were launched in
2007, but were paused in 2009 due to ‘differences in level of economic development and
openness between the members of the South-East Asian grouping’.33 This is code for the fact
that ASEAN member states were unable to agree among themselves on a level of ambition
for trade liberalisation which would satisfy the EU.
The EU has thereafter pursued bilateral FTAs with individual ASEAN members as a step
towards achieving a regional-level FTA in the longer term.34 To date, the European
Commission has concluded negotiations on bilateral FTAs with Singapore (EUSFTA) and
28 European Commission Directorate-General for Trade, European Union, Trade in goods with ASEAN (Association Of South-East Asian Nations), Brussels: European Commission, 2018, http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113471.pdf, p. 2. 29 European Commission Directorate-General for Trade, European Union, Trade in goods with ASEAN (Association Of South-East Asian Nations), Brussels: European Commission, 2018, http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113471.pdf, p. 2. 30 European Commission Directorate-General for Trade, European Union, Trade in goods with ASEAN (Association Of South-East Asian Natons), Brussels: European Commission, 2018, http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113471.pdf, p. 7. 31 ASEAN and EU, The Fifteenth AEM-EU Trade Commissioner Consultations, 10 March 2017: Joint Media Statement, Brussels: European Commission, http://trade.ec.europa.eu/doclib/docs/2017/march/tradoc_155416.%20AEM-EU%2015%20-%20Draft%20JMS%20-9%20March%20-cln.pdf, p. 1. 32 ‘ASEAN and the EU, European Union External Action Service,’ European Union External Action Service, last updated 11 May 2016, https://eeas.europa.eu/delegations/association-southeast-asian-nations-asean/906/asean-and-eu_en 33 ‘EU and ASEAN gear up for possible re-launch of trade talks’, European Commission, last updated 10 March 2017, http://trade.ec.europa.eu/doclib/press/index.cfm?id=1631 34 ‘Association of South East Asian Nations (ASEAN)’, European Commission, last updated 22 February 2017, http://ec.europa.eu/trade/policy/countries-and-regions/regions/asean/
Future Options for the UK-ASEAN Economic Relationship
11
Vietnam (EUVFTA).35 Neither agreement has entered into force however, with the EUSFTA
stalled due an internal conflict over competency between the Commission and member
states. Although this matter was put before the Court of Justice of the European Union (CJEU),
the debate on the best architecture for EU trade agreements and investment protection
agreements has continued.36 The present expectation among officials seems to be that a
revised text of the EUSFTA and/or EUVFTA could still be ratified by EU member states before
the UK leaves the EU.
Beyond the two FTAs with Singapore and Vietnam, the EU has pursued negotiations on a
bilateral FTA with four other ASEAN member states:37
1. EU-Malaysia Negotiations on hold (commenced 2010)
2. EU-Thailand Negotiations on hold (commenced 2013)
3. EU-Philippines Negotiations ongoing (commenced 2015)
4. EU-Indonesia Negotiations ongoing (commenced 2016)
Despite this focus on bilateral FTAs with selected ASEAN states, the EU and ASEAN have
revisited the possibility of a region-to-region FTA. In March 2017, the EU and ASEAN agreed in
a joint statement to take new steps towards resuming such talks.38 The perceived importance
of intensifying work towards the resumption of the ASEAN-EU FTA negotiations was
reaffirmed by Heads of State and Government of the Member States of ASEAN, the President
of the European Council and the Secretary-General of ASEAN at the ASEAN-EU
Commemorative Summit in November 2017.39
35 ‘EU-Singapore Free Trade Agreement. Authentic text as of May 2015’, European Commission, last updated 29 June 2015, http://trade.ec.europa.eu/doclib/press/index.cfm?id=961; ‘Vietnam’, European Commission, last updated 16 March 2017, http://ec.europa.eu/trade/policy/countries-and-regions/countries/vietnam/ 36 ‘Singapore’, European Commission, last updated 8 September 2017, http://ec.europa.eu/trade/policy/countries-and-regions/countries/singapore/index_en.htm; European Commission, The Opinion of the European Court of Justice on the EU-Singapore Trade Agreement and the Division of Competences in Trade Policy, Brussels: European Commission, http://trade.ec.europa.eu/doclib/docs/2017/september/tradoc_156035.pdf pp. 1-4. 37 European Parliament, Briefing, International Agreements in Progress: EU-Singapore Free Trade Agreement Stimulus for negotiations in the region, Brussels, European Parliament, http://www.europarl.europa.eu/RegData/etudes/BRIE/2017/607255/EPRS_BRI(2017)607255_EN.pdf, p. 2. 38 ASEAN and EU, The Fifteenth AEM-EU Trade Commissioner Consultations, 10 March 2017: Joint Media Statement, Brussels: European Commission, http://trade.ec.europa.eu/doclib/docs/2017/march/tradoc_155416.%20AEM-EU%2015%20-%20Draft%20JMS%20-9%20March%20-cln.pdf 39 ASEAN, Press Statement of the ASEAN-EU Commemorative Summit on the Occasion of the 40th Anniversary of the Establishment of ASEAN-EU Dialogue Relations, Jakarta: ASEAN Secretariat, http://asean.org/storage/2017/11/Press-Statement-of-the-ASEAN-EU-Commemorative-Summit-as-of-14-Nov-2017_FINAL.pdf , p. 2.
Future Options for the UK-ASEAN Economic Relationship
12
3. Future UK-ASEAN Relations: what are the options?
HMG has strengthened its diplomatic relations with ASEAN through the establishment of
diplomatic missions in every ASEAN member-state, and by also accrediting the British
Ambassador to Indonesia and Timor-Leste as the UK’s representative to ASEAN.40 The UK has
also acceded to the Treaty of Amity and Cooperation (TAC), and assisted regional integration
through the former ASEAN programme fund.41 Former Prime Minister David Cameron also
visited the ASEAN Secretariat in 2015.42 In 2012, the Prime Minister appointed three Trade
Envoys to the ASEAN region as part of the wider programme to help drive trade and strengthen
relationships. Today the UK’s Trade Envoys to ASEAN are: Richard Graham MP (Indonesia,
Malaysia, the Philippines and the AEC); Ed Vaizey MP (Vietnam, Cambodia, Laos); and Paul
Scully MP (Burma, Brunei, Thailand).43
There are several approaches that the UK can take regarding the development of UK-ASEAN
relations post-Brexit. One such approach involves building a formal partnership with ASEAN.
In terms of economic relations specifically, there are also several opportunities to consider in
relation to trade liberalisation in the form of establishing bi/pluri-lateral trade relations with
ASEAN states.
3.1 UK-ASEAN Formal Partnership Agreements
To date, ASEAN has committed to partnership arrangements on the premise that the partners
have the capacity to support ASEAN’s ongoing community building project. Article 44 of the
ASEAN Charter sets out that ASEAN may confer a ‘formal status’ on an external party that
allows non-members to engage ASEAN through three main partnership categories: Dialogue,
Sectoral, and Development.44 In addition, the idea of a Bespoke Partnership, which would
reflect the UK’s broad existing links with Southeast Asia, but also speak clearly to its regional
interests and ambitions, has also been broached. The main differences between these four
options are outlined below:
40 ‘UK Commits to Stronger Cooperation with ASEAN’, ASEAN Secretariat, last updated 16 January 2015, http://asean.org/uk-commits-to-stronger-cooperation-with-asean/; ‘The UK and South East Asia’, gov.uk, last updated 3 July 2012, https://www.gov.uk/government/speeches/the-uk-and-south-east-asia; ‘British Ambassador to Indonesia, ASEAN and Timor Leste, Moazzam Malik’, last updated unknown, https://www.gov.uk/government/people/moazzam-malik 41 ‘United Kingdom to Deepen its Engagement with ASEAN’, ASEAN Secretariat, last updated 27 July 2012, http://asean.org/united-kingdom-to-deepen-its-engagement-with-asean/; ‘ASEAN Programme Fund Financial Year 2016-17’, gov.uk, last updated 18 February 2016, https://www.gov.uk/government/publications/asean-programme-fund-financial-year-2016-17 42 ‘ASEAN, UK to Deepen Cooperative Relations’, ASEAN Secretariat, last updated 28 July 2015, http://asean.org/asean-uk-to-deepen-cooperative-relations/ 43 ‘Trade envoys’, gov.uk, last updated unknown, https://www.gov.uk/government/groups/trade-envoys; ‘Reappointed as PM’s Trade Envoy’, last updated 13 July 2017, https://www.richardgraham.org/news/reappointed-pms-trade-envoy; ‘British trade envoy talks up Việt Nam links’, Việt Nam News, last updated 2 November 2017, http://vietnamnews.vn/economy/416582/british-trade-envoy-talks-up-viet-nam-links.html#4ULO60Lc6YCKYdke.97; ‘My New Appointments’, scully.org.uk, last updated 16 December 2017, http://www.scully.org.uk/news/my-new-appointments/ 44 ASEAN, The ASEAN Charter, Jarkata: ASEAN, http://www.asean.org/wp-content/uploads/2012/05/11.-October-2015-The-ASEAN-Charter-18th-Reprint-Amended-updated-on-05_-April-2016-IJP.pdf, p. 33.
Future Options for the UK-ASEAN Economic Relationship
13
Dialogue Partner Status
Full Dialogue Partners engage ASEAN with respect to political, economic and socio-cultural
cooperation to considerable extent. All (with the exception of New Zealand) have established
cooperation funds to support joint projects, while also committing additional funding and
technical support for specific ASEAN initiatives. Dialogue Partners are thus especially
important to ASEAN members and the ASEAN Secretariat. ASEAN has concluded FTAs with
a number of them: Australia and New Zealand; China; India; Japan; and South Korea.
Meanwhile, Turkey, Mongolia, Kazakhstan, Mexico, Brazil and Sri Lanka have all put in bids for
Dialogue Partner status, but since 1999 ASEAN has enforced a moratorium on dialogue
partnerships.45
Sectoral Partner Status
Sectoral partnerships are limited to certain sectors where the partner can support ASEAN’s
continuing integration and community building priorities. Entering a sectoral partnership with
ASEAN is usually also preceded by several years of long-standing substantive cooperation
and sustained engagement with ASEAN members. A case in point is the recently concluded
ASEAN-Switzerland sectoral relationship.46 Switzerland works with the grouping across a
range of areas, including areas of humanitarian and protection challenges. By comparison,
Norway’s sectoral partnership with ASEAN, established in 2015, is presently structured around
disaster management as well as support for peacebuilding.47
Development Partner Status
A development partner of ASEAN would normally have a particularly strong record in assisting
ASEAN in the field of development, not least capacity building. The status of ‘Development
Partner’ has to date only been conferred once by ASEAN, namely onto Germany in July 2016.48
Notably, achieving this status proved possible despite Germany being a member of the EU. It
built on a strong record of German support for ASEAN: Germany appointed its first
ambassador to ASEAN in 2009. Since 2012, Germany and ASEAN cooperated through the
ASEAN-Germany Joint Cooperation Review, with annual review meetings. In the same year,
Germany commenced supporting the Capacity Development Programme for the ASEAN Inter-
Parliamentary Assembly.49 But it has been the ASEAN Secretariat in particular that has
benefitted from German support for capacity building.
45 Moe Thuzar, ‘What does it take to join ASEAN?’, ISEAS Perspective, 2017, No. 36, pp. 1-5, https://iseas.edu.sg/images/pdf/ISEAS_Perspective_2017_36.pdf 46 ‘ASEAN, Switzerland launch sectoral dialogue partnership for stronger cooperation’, ASEAN Secretariat, last modified 29 November 2016, http://asean.org/asean-switzerland-launch-sectoral-dialogue-partnership-for-stronger-cooperation/ 47 ASEAN, Overview: ASEAN-Norway Sectoral Dialogue Relations, Jakarta: ASEAN Secretariat, http://asean.org/storage/2017/04/Overview-of-ASEAN-Norway-Sectoral-Dialogue-Relations-as-of-April-2017r....pdf 48 ‘ASEAN, Germany formalise Development Partnership’, ASEAN Secretariat, last modified 23 January 2017, http://asean.org/asean-germany-formalise-development-partnership/ 49 ‘Capacity Development for the ASEAN Inter-Parliamentary Assembly (AIPA)’, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, last updated unknown, https://www.giz.de/en/worldwide/23928.html; ASEAN, Overview: ASEAN-Germany Development Partnership, Jakarta: ASEAN Secretariat, October 2017, http://asean.org/storage/2017/04/Overview-of-ASEAN-Germany-Development-Partnership-as-of-October-2017.pdf, p. 1.
Future Options for the UK-ASEAN Economic Relationship
14
The German government has also been among the largest contributors to ASEAN in support
of the ASEAN Community goals (US$161.6 million as of October 2017).50 Areas of cooperation
include agriculture, forestry, port development, energy efficiency, quality infrastructure,
competition policy and law. For the period 2016-2018, the German Foreign Ministry is again
funding a project designed to support the ASEAN Secretariat’s capacity.51
The ‘Bespoke Partnership’ with the UK
This option is as yet undefined. As with the other three options, it would be up to the the UK
private sector to recommend that HMG pursue it and in what form. This option is seen in the
UK as an alternative to the aforementioned partnership arrangements, especially given the
uncertainty whether a formal dialogue partnership with ASEAN would be possible at this time.
Whether it is available in name outside ASEAN’s formal partnership categories is uncertain.
ASEAN has thus far not opted to establish categories of partnership beyond those explicitly
listed in the ASEAN Charter. At the same time, the substance of the existing dialogue
partnerships and sectoral dialogue partnerships varies, suggesting that ASEAN is generally
open and flexible in its partnership arrangements.52
The ‘bespoke partnership’ is meant to reflect the UK’s full range of existing ties with Southeast
Asia. These relate to regional security, development and capacity building, as well as to The
UK’s commercial interests in Southeast Asia. HMG previously supported ASEAN regional
integration through initiatives such as the ASEAN Programme Fund, which was run out of the
Foreign and Commonwealth Office (FCO). The Fund supported projects from government,
NGOs and civil society that concentrate on conflict prevention, human rights, and rule of law
within ASEAN countries and ASEAN institutions.53 Recently, HMG also initiated the Cross-
Government Prosperity Fund Programme (2016-2021), also spearheaded by the FCO, which
in the context of Southeast Asia aims to provide technical assistance, capacity building
initiatives, and stakeholder discussions. These projects are aimed at improving the business
climate, competitiveness and operation of capital markets, energy and financial sector reform,
as well as increasing the ability of partner countries to tackle corruption.54
3.1.1 Questions and points to consider
While HMG is likely to take a decision on its future formal relationship with ASEAN against the
backdrop of an array of interests and capacity calculations, it is important for HMG to
50 ASEAN, Overview: ASEAN-Germany Development Partnership, Jakarta: ASEAN Secretariat, October 2017, http://asean.org/storage/2017/04/Overview-of-ASEAN-Germany-Development-Partnership-as-of-October-2017.pdf, p. 2. 51 ‘Support for the ASEAN Secretariat (AA)‘, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ)
GmbH, last updated unknown, https://www.giz.de/en/worldwide/16385.html 52 ‘External Relations’, ASEAN Secretariat, last updated unknown, http://asean.org/asean/external-relations/ 53 ‘ASEAN Programme Fund Financial Year 2016-17’, last updated 18 February 2016, https://www.gov.uk/government/publications/asean-programme-fund-financial-year-2016-17 54 ‘About the Cross-Government Prosperity Fund Programme – South East Asia’, Foreign and Commonwealth Office, last updated unknown, https://blogs.fco.gov.uk/about-the-south-east-asia-prosperity-fund-programme/; ‘Official Development Assistance (ODA): FCO Prosperity Fund spend’, last updated 16 November 2017, https://www.gov.uk/government/publications/official-development-assistance-oda-fco-prosperity-fund-spend
Future Options for the UK-ASEAN Economic Relationship
15
understand from the UK private sector which kind of future relationship between HMG and
ASEAN is likely to best support the UK’s economic interests in Southeast Asia.
ASEAN has not indicated a perspective on how it sees its future relationship with the UK.
Based on initial interviews with the diplomatic and policy community it also seems very
unlikely that ASEAN members will proactively map out a particular pathway for the UK to work
toward a formal relationship with the grouping. If HMG is to pursue such a formal relationship
with ASEAN in the future, the initiative for such ties will most likely need to come from the UK.
Not least in this context the question is whether the UK private sector believes that the UK’s
investments in diplomatic posts and commitments made should be further strengthened. For
instance, would the private sector recommend the appointment of an Ambassador to ASEAN
who would solely be dedicated to reinforcing relations with the Association?
A formal partnership with ASEAN does not guarantee that the business prospects of UK
companies operating in Southeast Asia will dramatically improve. However, building a formal
relationship may well be a prerequisite for strong and effective UK-ASEAN relations in the
future. The extent to which the UK will be able to promote the interests of UK business in
Southeast Asia may also depend on how much the UK will invest longer-term in its relationship
with ASEAN. Indeed, some ideas regarding possible FTAs (e.g. ASEAN-UK FTA) are likely to
be dependent on the UK being recognised as a dialogue partner. At the same time, not all FTAs
that the UK might wish to conclude with Southeast Asian countries necessarily depend on the
UK having a partnership agreement with ASEAN.
3.2 Possible Bi/Pluri-lateral Trade Relations with ASEAN States
There are at least three possible opportunities to consider in relation to trade liberalisation in
so far as Southeast Asian states are concerned. In principle, the UK could aim to realise one
or more of the options listed below. For the UK’s private sector the question is which option,
if any, HMG should pursue as a priority. A secondary question is whether HMG should aim to
boost business prospects in other ways in the absence of new free trade arrangements which
may take some years to achieve.
HMG is bound by existing EU trade agreements at least until the end of the transitional period
that will begin once the UK leaves the EU. During this period it can negotiate but not conclude
new FTAs. Also, the UK may very well need to invest time to establish new terms at the WTO
under its own independent schedules for tariffs and services as these commitments set the
baseline for plurilateral FTAs such as the Comprehensive and Progressive Agreement for
Trans-Pacific Partnership (CPTPP) (discussed below), while almost always providing the
Future Options for the UK-ASEAN Economic Relationship
16
baseline for bilateral FTAs.55 Negotiations to establish the UK’s own independent schedules
could prove difficult as the WTO operates by consensus.56
Bilateral free trade deals with selected ASEAN member states
Bilateral FTAs with individual ASEAN countries could be pursued either for their own merits or
as a stepping stone towards a more comprehensive FTA with ASEAN as a whole. Should the
ratification of the EU-Singapore/Vietnam FTAs precede the UK’s exit from the EU, HMG may
be able to roll-over these two existing deals. A trade agreement with Singapore could be
particularly attractive given the depth of shared history with the UK; and Singapore is clearly
interested. Prime Minister Lee Hsien Loong has reaffirmed that Singapore would be willing to
sign a trade deal with Britain after it leaves the EU. Current projections are that it is more likely
for the EUSFTA to enter into force before March 2019 than the EUVFTA. There may also be
further opportunities to negotiate bilateral FTAs with individual ASEAN countries. The
previous Malaysian government, for instance, has stated that Brexit may present an
opportunity to increase bilateral trade relations if the UK decided to reach out to strategically
important nations beyond the EU.57 However, it remains to be seen if this interest will be
maintained under the new government.
Another possibility would be to build on the example of the Indonesia-Australia
Comprehensive Economic Partnership Agreement (IA-CEPA), which focuses on addressing
impediments to bilateral trade (tariff and non-tariff barriers), enhancing access to each other’s
services markets, and increasing investments.58
ASEAN-UK Free Trade Agreement
In principle, the UK could explore the feasibility of a FTA with ASEAN. To date, numerous
countries - all of these have been formal dialogue partners - have concluded such FTAs. These
FTAs tend to take into account the different levels of economic development achieved by
ASEAN member states. One possible model is the existing ASEAN-Australia-New Zealand FTA
(AANZFTA).59 The AANZFTA not only supports greater ASEAN economic integration, but also
affords differential treatment to developing members, while Canberra and Wellington directly
55 ‘Should Singapore (Or Anyone Else) Sign A Bilateral Trade Deal With The UK?’, Asian Trade Centre, last updated 12 July 2016, http://www.asiantradecentre.org/talkingtrade//should-singapore-or-anyone-else-sign-a-bilateral-trade-deal-with-the-uk; ‘Joining The TPP: A Path Forward For The UK?’, Asian Trade Centre, last updated 4 January 2018, http://www.asiantradecentre.org/talkingtrade//joining-the-tpp-a-path-forward-for-the-uk; ‘Special Edition: The WTO “Fall Back” Option For Brexit’, Asian Trade Centre, last updated 29 March 2017, http://www.asiantradecentre.org/talkingtrade//special-edition-the-wto-fall-back-option-for-brexit 56 ‘Whose WTO is it anyway?’, World Trade Organization, last updated unknown, https://www.wto.org/english/thewto_e/whatis_e/tif_e/org1_e.htm 57 ‘Malaysia's PM Najib says Brexit vote must be respected, no major impact on Malaysian economy expected’, The Straits Times, last modified 24 June 2016, http://www.straitstimes.com/asia/se-asia/malaysias-pm-najib-says-brexit-vote-must-be-respected-no-major-impact-on-malaysian 58 ‘Indonesia-Australia Comprehensive Economic Partnership Agreement’, Australian Government, Department for Foreign Affairs and Trade, last updated unknown, http://dfat.gov.au/trade/agreements/negotiations/iacepa/Pages/indonesia-australia-comprehensive-economic-partnership-agreement.aspx, 59 ‘Overview: The ASEAN-Australia-New Zealand Free Trade Area (AANZFTA)’, ASEAN, last updated unknown, http://aanzfta.asean.org/aanzfta-overview/
Future Options for the UK-ASEAN Economic Relationship
17
fund capacity development activities under the AANZFTA Economic Cooperation Support
Program (AECSP).60
Both Australian and New Zealand private sectors have underlined the benefits of the
AANZFTA through the reductions and elimination of tariffs and the direct ministerial access
facilitated through the ASEAN-CER Business Engagement Session at the 22nd AEM-CER
Consultations. However, businesses in both countries have identified a number of areas for
further work under AANZFTA including the persistence of non-tariff measures (NTMs);
improving legal certainty and predictability on services regulations and investment regimes;
and further development of rules in areas where policy frameworks are still developing.
Sustained and alternative areas of engagement are also noted as lacking with further
opportunities requiring exploration.61
Free Trade Agreements beyond ASEAN that involve Southeast Asian states
The UK does not qualify for joining the Regional Comprehensive Economic Partnership (RCEP)
as it builds only on already existing FTAs between ASEAN and its dialogue partners. However,
HMG has already signalled interest in possibly joining the CPTPP, a free trade agreement
incorporating eleven countries in the Pacific region: Japan, New Zealand, Australia, Canada,
Chile, Mexico, Peru, Brunei Darussalam, Malaysia, Singapore, and Vietnam. Thailand has also
expressed an interest to join this year.62 The arrangement, which has no geographical
restriction on membership, was originally titled the Trans-Pacific Partnership (TPP) but was
renamed on the side-lines of the APEC summit in 2017, to reflect a new consensus that had
emerged after the four rounds of negotiation since the U.S. withdrawal earlier that year.63
The CPTPP incorporates, by reference, the provisions of the TPP agreement, but with some
differences. More than 20 provisions have been suspended or changed, including rules around
intellectual property originally included at the request of Washington.64 The CPTPP was
formally signed in March 2018. Each CPTPP member will undertake its own domestic
ratification procedures.65 The agreement will reduce tariffs in economies that together
60 'Special And Differential Treatment Under AANZFTA’, ASEAN Secretariat, last updated unknown, http://aanzfta.asean.org/special-and-differential-treatment/; ‘Overview Of The AANZFTA Economic Cooperation Support Program (AECSP)’, ASEAN Secretariat, last updated unknown, http://aanzfta.asean.org/aecsp-overview/ 61 Free Trade Area Joint Committee (FJC), Report of the FTA Joint Committee: General Review of AANZFTA Stage One: Review of Implementation 2010-2017, Canberra: Australian Department for Foreign Affairs and Trade, http://dfat.gov.au/trade/agreements/in-force/aanzfta/news/Documents/aanzfta-general-review-stage-one-report-october-2017.pdf, pp. 15-18. 62 ‘Thailand wants to join CPTPP trade pact this year: deputy PM’, Reuters, last updated 29 March 2018, https://uk.reuters.com/article/us-trade-tpp-thailand/thailand-wants-to-join-cptpp-trade-pact-this-year-deputy-pm-idUKKBN1H51FO 63 ‘Trans-Pacific Partnership Ministerial Statement’, Australian Department of Foreign Affairs and Trade, last updated 11 November 2017, http://dfat.gov.au/trade/agreements/tpp/news/Pages/trans-pacific-partnership-ministerial-statement.aspx 64 ‘Annex II - List of Suspended Provisions’, Government of Canada, last updated 10 November 2017, http://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/tpp-ptp/annex2-annexe2.aspx?lang=eng 65 ‘Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – frequently asked questions,’ Government of Canada, last updated 20 February 2018, http://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cptpp-ptpgp/faq.aspx?lang=eng
Future Options for the UK-ASEAN Economic Relationship
18
amount to more than 13 percent of global GDP – a total of $10 trillion.66 The CPTPP has at
least one possible attraction in that it involves some of the UK’s primary economic partners
from Southeast Asia and the wider Asia-Pacific (e.g. Japan). The CPTPP represents a more
progressive FTA than could be expected to be on offer with ASEAN.
66 ‘Final version of Trans-Pacific trade deal released, rules pushed by US on ice,’ The Straits Times, last updated 21 February 2018, http://www.straitstimes.com/asia/australianz/final-version-of-cptpp-trade-deal-released-rules-pushed-by-us-on-ice
Future Options for the UK-ASEAN Economic Relationship
19
Conclusion
The UK’s economic relations with Southeast Asia are significant but there has been no major
upward trend in UK exports of goods for some time. Trade in services also makes for a
differentiated picture. That HMG is interested in strengthening economic ties with Southeast
Asia is therefore obvious. What is less obvious perhaps is how the UK should go about
reinforcing its economic relations with states in the Southeast Asian region, including ASEAN.
Given the importance of future prosperity in the context of British foreign policy, the input of
the UK’s business community to the debate will be particularly important.
This report spelled out options for a future formal UK-ASEAN relationship. HMG is well placed
to seriously consider all the options and to put forward a proposal to ASEAN. The question for
the business community is whether it wishes to encourage and support the building of such
a formal UK-ASEAN relationship and which type it prefers. Similarly, the report has spelled out
different options that HMG may wish to pursue in relation to new FTAs. Here the business
community is asked to weigh the relative merits of the UK seeking membership in CPTPP and
negotiating a FTA with ASEAN members in the first instance.
When considering the options available to the UK, it is worth noting that a formal partnership
with ASEAN does not guarantee that the business prospects of UK companies operating in
Southeast Asia will dramatically improve. However, building a formal relationship may be a
pre-requisite for strong and effective UK-ASEAN relations in the future and could affect the
extent to which HMG is able to promote the interests of UK business in the region.
Future Options for the UK-ASEAN Economic Relationship
20
Annex: UK Economic Performance with Southeast Asia
Table 1:
United Kingdom Exports and Imports in Goods with Southeast Asian states, 2010-2016.67
Figures in $ millions
2010 2011 2012 2013 2014 2015 2016
Brunei Exports $234.1 m
$21.9 m
$213.7 m
$34.2 m
$1.3 bn
$92.7 m
$1.5 bn
$68.2 m
$301.2 m
$118.2 m
$630.2 m
$48.3 m
$127.4 m
$41.8 m Imports
Cambodia Exports $11.0 m
$496.4 m
$29.5 m
$764.5 m
$17.1 m
$841.0 m
$27.8 m
$1.0 bn
$18.4 m
$1.3 bn
$25.3 m
$1.4 bn
$23.5 m
$1.3 bn Imports
Indonesia Exports $678.8 m
$2.3 bn
$1.0 bn
$2.5 bn
$1.0 bn
$2.1 bn
$1.1 bn
$2.0 bn
$1.0 bn
$2.0 bn
$705.0 m
$1.8 bn
$716.8 m
$1.8 bn Imports
Lao PDR Exports $5.3 m
$80.7 m
$13.2 m
$112.7 m
$5.5 m
$106.8 m
$7.1 m
$80.3 m
$5.9 m
$65.9 m
$9.8 m
$50.7 m
$7.8 m
$51.3 m Imports
Malaysia Exports $1.9 bn
$3.2 bn
$2.3 bn
$3.1 bn
$2.3 bn
$2.7 bn
$2.5 bn
$2.6 bn
$2.5 bn
$2.8 bn
$2.1 bn
$2.6 bn
$1.8 bn
$2.2 bn Imports
Myanmar Exports $8.2 m
$55.0 m
$9.7 m
$69.3 m
$20.4 m
$64.7 m
$69.2 m
$87.8 m
$33.8 m
$126.5 m
$26.2 m
$157.0 m
$43.6 m
$206.4 m Imports
Philippines Exports $441.6 m
$1.1 bn
$457.5 m
$2.4 bn
$527.2 m
$608.2 m
$585.4 m
$564.4 m
$601.2 m
$614.7 m
$600.5 m
$627.8 m
$540.5 m
$640.4 m Imports
Singapore Exports $5.1 bn
$4.6 bn
$5.9 bn
$4.8 bn
$6.9 bn
$4.5 bn
$6.7 bn
$2.7 bn
$6.2 bn
$2.1 bn
$6.0 bn
$1.5 bn
$6.2 bn
$2.0 bn Imports
Thailand Exports $2.3 bn
$4.3 bn
$3.3 bn
$4.6 bn
$3.2 bn
$3.9 bn
$3.7 bn
$3.8 bn
$2.4 bn
$4.0 bn
$1.9 bn
$3.6 bn
$1.5 bn
$3.7 bn Imports
Viet Nam Exports $427.1 m
$2.2 bn
$521.6 m
$3.0 bn
$463.1 m
$3.9 bn
$475.8 m
$4.5 bn
$560.3 m
$4.1 bn
$575.5 m
$4.9 bn
$652.1 m
$5.1 bn Imports
67 Department for International Trade and the Department for Business, Energy and Industrial Strategy, International trade in goods and services based on UN Comtrade data, United Nations Trade Statistics Branch, https://comtrade.un.org/labs/dit-trade-vis/?reporter=826&type=C&year=2016&flow=2&commodity
Future Options for the UK-ASEAN Economic Relationship
21
Table 2:
United Kingdom Exports and Imports in Services with Southeast Asian states, 2010-2016
(Total EBOPS 2002 Services).68
Figures in $ millions
2010 2011 2012 2013 2014 2015
Brunei Exports $131.4 m
$6.1 m Imports
Cambodia Exports $12.2 m
No data Imports
Indonesia Exports $591.8 m
$200.8 m
$637.7 m
$213.0 m
$723.5 m
$281.2 m
$481.5 m
$339.2 m
$523.3 m
$366.9 m
$676.8 m
$299.4 m Imports
Lao PDR Exports $6.1 m
$3.1 m Imports
Malaysia Exports $1.2 bn
$592.8 m
$1.3 bn
$443.8 m
$1.6 bn
$412.8 m
$1.6 bn
$603.9 m
$1.2 bn
$479.7 m Imports
Myanmar Exports $129.9 m
No data Imports
Philippines Exports $261.1 m
$774.1 m
$248.3 m
$980.6 m
$407.6 m
$965.2 m
$206.3 m
$381.4 m
$189.3 m
$427.8 m
$323.9 m
$440.0 m Imports
Singapore Exports $4.6 bn
$2.2 bn
$5.2 bn
$2.7 bn
$2.8 bn
$2.4 bn
$3.4 bn
$2.5 bn
$3.6 bn
$3.4 bn
$6.0 bn
$3.3 bn Imports
Thailand Exports $585.6 m
$1.0 bn
$748.2 m
$1.1 bn
$818.2 m
$1.1 bn
$1.1 bn
$1.2 bn
$1.0 bn
$1.3 bn
$922.7 m
$1.3 bn Imports
Viet Nam Exports $198.6 m
$178.8 m Imports
68 Department for International Trade and the Department for Business, Energy and Industrial Strategy, International trade in goods and services based on UN Comtrade data, United Nations Trade Statistics Branch, https://comtrade.un.org/labs/dit-trade-vis/?reporter=826&type=S&year=2016&flow=2&commodity
Future Options for the UK-ASEAN Economic Relationship
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Table 3: Change in UK Goods Import Market Share from 2014 to 2016(%). Source: Official national import statistics, recent data not available for the Philippines, *Indonesia data for goods & services (breakdown not available) so not included in total.69
UK Germany France Italy
2014 2016 2014 2016 2014 2016 2014 2016
ASEAN-4 1.1 1.0 2.7 2.8 1.5 1.6 1.0 1.0
Singapore 1.7 1.8 2.9 3.0 2.2 2.9 1.1 1.3
Malaysia 1.0 0.9 3.4 3.4 1.8 1.4 0.9 0.8
Thailand 1.2 1.0 2.6 3.0 1.1 1.4 1.0 1.0
Vietnam 0.4 0.4 1.8 1.6 0.8 0.7 0.9 0.8
Indonesia* 0.5 0.7 2.3 2.3 0.7 1.0 1.0 1.0
69 Southeast Asia Economic and Trade Policy Network, SE Asia Market Share Analysis, Singapore: Southeast Asia Economic and Trade Policy Network, p. 5.
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Table 4: Outward UK FDI for ASEAN, for Earnings, Flows and Positions, 2007 to 2015 - Nil or no data returned - Disclosive data.70
Figures in £ millions
COUNTRY TOTALS 2007 2008 2009 2010 2011 2012 2013 2014 2015
Brunei
Darussalam
Earnings .. .. .. .. .. .. .. .. ..
Flows .. .. .. .. 49 40 .. .. ..
Positions .. .. 14 30 .. 216 .. .. ..
Indonesia Earnings 170 178 400 560 1065 1047 661 772 412
Flows -91 40 662 3184 3933 277 426 92 -163
Positions 853 1093 1897 2712 5976 4089 3331 4303 4493
Cambodia Earnings 1 2 .. -3 - -4 -4 -4 -3
Flows - .. -1 -4 - -6 -4 -4 -5
Positions .. .. .. .. .. .. 16 19 12
Laos Earnings .. .. .. .. - .. .. .. ..
Flows .. .. .. .. 2 .. .. .. ..
Positions .. .. .. .. -1 .. .. .. ..
Myanmar Earnings - - - - - .. .. -1 -1
Flows - - - - - .. .. -1 -1
Positions - - - - - .. .. .. 7
Malaysia Earnings 587 526 674 734 536 562 435 988 998
Flows 218 312 280 629 800 550 164 1541 -1062
Positions 1035 1380 879 1433 1874 1910 3984 3266 2113
Philippines Earnings 325 195 159 139 61 67 41 54 70
Flows 302 14 123 150 -139 -750 -58 -31 -43
Positions 753 853 583 599 565 233 149 162 174
Singapore Earnings 469 959 2423 2278 3158 3039 -635 1675 1307
Flows -
2155
2417 1572 4882 -43882 -18893 -1533 1662 2034
Positions 7684 14639 8850 9791 10658 9060 10939 16409 17779
Thailand Earnings 11 -122 164 173 201 244 194 287 190
Flows -15 275 300 141 164 272 137 204 484
Positions 1351 1653 1174 1308 1395 1496 1151 2545 2115
Vietnam Earnings 87 -108 117 179 353 187 -21 111 192
Flows 30 -94 -9 1385 320 646 -101 46 146
Positions 430 675 584 931 1245 533 -245 -8 61
70 UK Office for National Statistics, Inward and Outward Foreign Direct Investment for ASEAN countries, China and Japan for Earnings, Flows and Positions, 2007 to 2015, London: UK Office for National Statistics, last updated 11 April 2017, https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/adhocs/006924inwardandoutwardforeigndirectinvestmentforaseancountrieschinaandjapanforearningsflowsandpositions2007to2015
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Table 5:
Flows of Inward Direct Investment to ASEAN by Source Country and Economic Sectors.71
Figures in US$ Million
Source Country Economic Sector 2013 2014 2015 2016
United Kingdom [GB] [A] Agriculture, forestry, and
fishing 262.14 96.76 106.74 28.15
United Kingdom [GB] [B] Mining and quarrying 668.39 722.14 755.47 273.53
United Kingdom [GB] [C] Manufacturing 1,250.25 2,348.31 1,531.06 2,445.26
United Kingdom [GB] [D] Electricity, gas, steam and
air conditioning supply 7.30 61.41 -385.56 -198.28
United Kingdom [GB]
[E] Water supply; sewerage,
waste management and
remediation
0.18 26.24 -200.38 26.65
United Kingdom [GB] [F] Construction 1.99 4.27 22.12 3.06
United Kingdom [GB]
[G] Wholesale and retail trade;
repair of motor vehicles and
motor cycles
1,600.23 722.14 736.63 1,868.53
United Kingdom [GB] [H] Transportation and
storage 159.13 232.35 -6.38 211.04
United Kingdom [GB] [I] Accommodation and food
service 11.56 18.27 5.70 10.88
United Kingdom [GB] [J] Information and
communication 142.87 3.20 -36.99 51.71
United Kingdom [GB] [K] Financial and Insurance -778.78 4,644.00 608.76 -
5,787.33
United Kingdom [GB] [L] Real estate 16.52 140.72 213.34 35.85
United Kingdom [GB] [M] Professional, scientific
and technical 61.02 -28.80 46.74 39.21
United Kingdom [GB] [N] Administrative and
support service 22.05 18.66 12.29 15.55
United Kingdom [GB]
[O] Public administration and
defence; compulsory social
security
0.00 0.00 0.00 0.00
United Kingdom [GB] [P] Education -0.13 1.30 1.79 3.30
United Kingdom [GB] [Q] Human health and social
work 0.47 2.95 0.47 0.26
United Kingdom [GB] [R] Arts, entertainment and
recreation 9.24 -8.71 -0.59 2.35
United Kingdom [GB] [S] Other services. 66.11 -87.46 342.86 2,455.64
United Kingdom [GB] [Z] Unspecified 68.90 -333.89 -152.55 248.65
United Kingdom [GB] [999] TOTAL Activities 4,638.74 10,767.34 3,517.91 1,729.31
71 Note: 2016 data is preliminary. Source: ASEAN Secretariat - ASEAN FDI Database as of 31 October 2017, https://data.aseanstats.org/fdi_by_sector.php
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Table 6:
Flows of Inward Direct Investment to ASEAN by Source Country and Economic Sectors.72
Figures in US$ Million
Source Country Economic Sector 2013 2014 2015 2016
Austria [AT] TOTAL Activities 395.17 39.19 -152.14 95.71
Belgium [BE] TOTAL Activities 279.73 233.63 709.46 151.24
Bulgaria [BG] TOTAL Activities 0.86 0.26 0.52 0.87
Croatia [HR] TOTAL Activities 0.00 0.00 0.09 0.12
Cyprus [CY] TOTAL Activities 48.69 12.93 6.10 1.23
Czech Rep [CZ] TOTAL Activities 4.50 15.75 1.83 13.31
Denmark [DK] TOTAL Activities -440.31 -115.75 985.87 3,104.76
Estonia [EE] TOTAL Activities 0.24 0.14 -0.10 1.15
Finland [FI] TOTAL Activities 316.41 -145.27 175.15 65.09
France [FR] TOTAL Activities 986.40 1,173.23 264.51 947.07
Germany [DE] TOTAL Activities -836.20 49.03 -268.71 720.55
Greece [GR] TOTAL Activities 1.79 0.36 3.26 7.88
Hungary [HU] TOTAL Activities 8.11 -27.75 -34.48 33.26
Ireland [IE] TOTAL Activities 173.89 2,825.36 4,804.93 8,115.44
Italy [IT] TOTAL Activities 213.18 63.45 14.59 -16.80
Latvia [LV] TOTAL Activities 2.91 6.50 5.27 3.21
Lithuania [LT] TOTAL Activities 0.05 0.03 0.02 0.09
Luxembourg [LU] TOTAL Activities 2,835.54 12,196.21 2,300.32 4,511.99
Malta [MT] TOTAL Activities 10.31 7.37 17.68 14.03
Netherlands [NL] TOTAL Activities 10,580.19 8,944.85 7,873.17 9,777.58
Poland [PL] TOTAL Activities 4.87 20.89 2.88 15.72
Portugal [PT] TOTAL Activities -10.82 7.17 17.23 2.43
Romania [RO] TOTAL Activities 1.61 -0.74 -0.21 0.36
Slovakia [SK] TOTAL Activities 0.56 0.08 0.57 0.88
Slovenia [SI] TOTAL Activities 0.05 -0.46 0.21 0.50
Spain [ES] TOTAL Activities 281.14 249.72 -15.69 1,246.47
Sweden [SE] TOTAL Activities -43.11 282.53 -27.37 127.20
United Kingdom[GB] TOTAL Activities 4,638.74 10,767.34 3,517.91 1,729.31
72 Note: 2016 data is preliminary. Source: ASEAN Secretariat - ASEAN FDI Database as of 31 October 2017, https://data.aseanstats.org/fdi_by_sector.php
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Chart 1:
Origin of EU-28 exports of goods to ASEAN, 2015 (% share of EU-28 exports to ASEAN).73
Chart 2: Destination of EU-28 exports of goods to ASEAN, 2015 (% share of EU-28 exports to ASEAN).74
73 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, Brussels: European Union, 2017, http://ec.europa.eu/eurostat/documents/3217494/8092219/KS-01-17-424-EN-N.pdf/8e0e728b-1d36-4aae-b742-851a73963e51, p. 28. 74 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, p. 28.
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Chart 3: Origin of EU-28 imports of goods from ASEAN, 2015 (% share of EU-28 imports from ASEAN).75
Chart 4:
Destination of EU-28 imports of goods from ASEAN, 2015 (% share of EU-28 imports from
ASEAN)76
Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, p. 29. 76 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, p. 29.
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Chart 5: Origin of EU-28 exports of services to ASEAN, 2015 (% share of EU-28 exports to ASEAN).77
Chart 6: Destination of EU-28 exports of services to ASEAN, 2015 (% share of EU-28 exports to ASEAN).78
77 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, p. 32. 78 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, p. 32.
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Chart 7:
Origin of EU-28 imports of services from ASEAN, 2015 (% share of EU-28 imports from
ASEAN)79
Chart 8: Destination of EU-28 imports of services from ASEAN, 2015 (% share of EU-28 imports from ASEAN)80
79 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, p. 33. 80 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, p. 33.
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Graph 1:
Origin of net outflows of foreign direct investment from EU-28 to ASEAN, average 2013–2015
(% share of net outflows of foreign direct investment from EU-28 to ASEAN).81
Graph 2: Destination of net outflows of foreign direct investment from EU-28 to ASEAN, average 2013–2015 (% share of net outflows of foreign direct investment from EU-28 to ASEAN).82
81 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, p. 35. 82 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, p. 35.
Future Options for the UK-ASEAN Economic Relationship
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Graph 3:
Destination of net inflows of foreign direct investment from ASEAN to EU-28, average 2013–
2015 (% share of net inflows of foreign direct investment from ASEAN to EU-28).83
Note: Spain, Luxembourg, Austria, Portugal and Finland, confidential; data for some partners
for some years confidential for most EU Member States.
Graph 4:
Origin of net inflows of foreign direct investment from ASEAN to EU-28, average 2013–2015
(% share of net inflows of foreign direct investment from ASEAN to EU-28).84
83 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, p. 36. 84 Eurostat, 40 Years of EU–ASEAN Cooperation Key statistics, p. 36.